European banks urge delay for Basel III

EU banks would be at a competitive disadvantage if they introduced the new rules before their US counterparts, the European Banking Federation argues.
Photo: Ralph Orlowski

European banks have asked the European Commission to postpone the introduction of tougher global bank capital rules by a year to 2014 after US regulators delayed application of the new requirements.

The new rules, known as Basel III, are the world's regulatory response to the 2007-09 financial crisis and would force banks to triple the amount of basic capital they hold in a bid to avoid future taxpayer bailouts.

The European Banking Federation sent a letter on November 21 to EU Internal Market Commissioner Michel Barnier, formally requesting a delay on the grounds that EU banks would be at a competitive disadvantage if they introduced the new rules before their US counterparts.

"We are now very troubled over the possible repercussions that the most recent statement from the US Authorities may have for the international competitiveness of Europe's banks," the letter, made available to Reuters on Saturday, said.

It said EU banks were facing sweeping regulatory changes including new capital requirements and liquidity buffers, and the creation of a EU supervisory authority.

"All the while, our US competitors will not have matching obligations imposed on them in parallel, or in a foreseeable future," it said, asking for the introduction of the new rules to be delayed to Jan.1, 2014.

European banks have long complained that protracted negotiations on the new rules meant they would not have enough time to start implementing them from next year, as planned.

Now they have stepped up calls for a postponement, arguing the recent US decision to delay applicaiton of Basel III risked creating a trend whereby Europe tightens the regulatory noose around its banks while other jurisdictions hold back.

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A spokesman for Barnier said the EU would seek a coordinated stance with the United States.

"We will wrap up negotiations in the coming weeks between countries and parliament (on Basel III) and Michel Barnier will seek clarity from the US and work for a coordinated US-EU approach. Basel 3 norms are important for sound and competitive banks in Europe."

When asked about the possibility of a delay, the spokesman said: "The important thing now is to conclude trilogue (talks between commission, EU countries and the European parliament) so that the EU can start applying Basel III rules in 2013. In any case, the various norms come into force gradually up until 2019."

The Basel III rules are meant to be phased in from January 2013 but US regulators cast doubt on the timeframe due to a flood of industry comments on the proposals.

"Basel III must be postponed, full stop" said the head of Italy's banking association ABI, Giuseppe Mussari, at a conference in the central Italian town of Gubbio.

"Clearly there is no worldwide agreement, so we wouldn't be starting on a level playing field."

However, the head of Germany's financial regulator warned this week against a staggered or delayed introduction of the rules.